How companies can tackle transaction fraud


In an age where the average person now conducts the majority of their payments either online or digitally, the scourge of transaction fraud has become an even bigger threat.

In a recent post by Sentinels, the company outlined with transaction fraud is and what companies can do to tackle it.

Sentinels said, “If your business accepts or facilitates online payments, then this is a key risk vector for your company. The only thing criminals need are stolen credit card details to make purchases, by the time the true owner of the credit card has issued a chargeback and been made whole, the business has supplied the criminal with what they wanted – losing both product and money in the process.”

According to the firm, there are billions of potential savings to be had if this problem is tackled by a company.

How can RegTechs help fight transaction fraud? First of all, they could look to use the power of real-time transaction monitoring.

The firm remarked, “Real-time payment processes result in a better experience for every entity in a transaction, so long as it’s a legitimate transaction. But this speed of payment is impossible for a human to respond to, resulting in either a batch-processing approach, which misses the fraud and only restores one party or a real-time responsiveness which requires automation, a core banking system, and intimate understanding of customer payment behaviours.”

The presence of cashless transactions is climbing, with them making up a third of all transactions in the UK and non-cash payments in the eurozone in 2022 are valued at €197tn.

According to Sentinels, targeting just a small percentage of that value reaps huge rewards for fraudsters. Many of these payments happen in real-time, so using real-time transaction monitoring is the only way to tackle the scale of the issue.

Sentinels added, “If your transaction monitoring systems have real-time monitoring in place, they’ll be able to communicate with a core banking system using business rules. Allowing your AML program to react faster than human intervention and flag or hold transactions for manual review before the fraud completes.”

Companies are also called on to ‘automate everything where possible’. Through automating the data-heavy elements of compliance, Sentinels claims, it becomes much easier to work with usable data and perceive patterns of behaviour.

The company commented, “Manual data-entry slows down the speed of your compliance team and drains them of energy before they even open their first flagged transaction. Automation allows for that data to be presented to them immediately and with full trust in its accuracy.”

Through bringing automation into the transaction fraud monitoring process, it can become simpler to collate and submit reports when suspicions are raised. In addition, automation also prevents bad actors from making any sneaky changes to transactions or colluding with criminals outside of your organisation.

Lastly, it is important for firms to understand the power of integrated data. Sentinels remarked, “Examining transactions effectively is no easy task. By unifying your KYC and CDD data with your flagged transactions it becomes far simpler to understand the context and purpose of a transaction.

“Being able to access a rich client profile with all the information of whoever initiated the transaction makes for easier investigations. Patterns can be detected more easily and allow for more efficient remediation of the issue.

“By taking advantage of KYC and CDD data that was provided to your business when customers first onboarded there is a significant reduction in time taken for investigations. It becomes immediately obvious whether the transaction fits the profile of the customer, and it also means your business is leveraging data it already owns to obtain greater insights.”

Read the full post here.

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